IRS cutting 1,800 Covington jobs by 2019

The rise in online tax filing means the loss of 1,800 jobs at the Internal Revenue Service facility in Covington, the agency announced Wednesday.

An overwhelming majority of the American population filed their income tax returns via the internet in 2015: 86 percent, up from 58 percent in 2008, the IRS reported.

That has led IRS executives to conclude brick-and-mortar processing facilities, like the large sprawling 450,000-square-foot IRS facility along Covington's riverfront on Fourth Street, are no longer needed. Employees were notified by email Wednesday morning of the IRS' decision to close the processing operations by 2019. The IRS will also close facilities in Fresno, California and Austin, Texas.

Depending on the time of year, the IRS employed 3,500 to 5,000 people in Covington. The IRS will maintain between 1,000 to 2,000 employees in Covington offices in the Gateway Center building and at Madison Avenue and Third Street.

"This is going to be a real impact on the local economy," said Rick Riley, a 31-year employee of the IRS and president of the local National Treasury Employees Union. "We have young mothers here. Grandmothers here supporting their grandchildren. These people here are trying to support their families. It's going to be hard on these people."

Covington City Manager Larry Klein was blindsided by the announcement. The IRS is Covington's second largest employer, behind Fidelity Investments.

The city wasn't notified ahead of time, Klein said.

"It's unfortunate that's how they let folks know the information," Klein said. "As big of an impact as that, they could have called us up."

Employees asked for comment told The Enquirer they weren't allowed to talk to the media.

Their loss is also a loss for local businesses.

Many of the IRS employees walk a couple blocks to Paul Shanley's restaurant, Molly Malones, for lunch and dinner. Shanley thinks he has a diverse enough clientele to weather the loss, but he said he will notice the absence of 1,800 employees.

"It's a huge employer on our doorstep," Shanley said. "This is the first I've heard of it. I haven't got my head on it yet. It's hard to know what it'll do. There's a lot going on in Covington right now, new condos, businesses."

Covington had seemed to gain some momentum in the last few months. In the past month, Global clinical trials firm CTI announced it will move up to move 250 jobs into the RiverCenter towers and then add up to 500 more over 10 years. Huntington Bank also announced it will move 117 jobs into the city.

The loss of 1,800 IRS employees could amount to $1.5 million to $2 million in lost tax revenue for the city, which is about 3 percent of Covington's budget, officials said. But given the three-year warning and additional growth in the city, it's too early to jump to any conclusions about whether this will have any impact on the city budget, Klein said.

Both Riley and Klein vowed to fight the IRS' decision. Klein said he's meeting with representatives with representatives from U.S. Sen. Mitch McConnell's office and other members of Kentucky's federal delegation tomorrow. Riley said McConnell, U.S. Rep. Thomas Massie and other legislators will hear from him as well.

"There's going to be a fight," Riley said. "I will be going to the local politicians, the mayors, the member of Congress."

McConnell's spokesman Robert Steurer in a statement said his staff has been in contact with local officials and the IRS and "is seeking clarity" on how to help. Exactly what McConnell can do wasn't clear.

The IRS closure in Covington has a silver lining. The city for decades had tried to convince the IRS build a vertical tower on the Fourth Street location so it would take up less valuable real estate. The closure will free up prime riverfront property to redevelop, Klein said.

"That flat-top building is outdated," Klein said. "It occupies prime riverfront property. It could be put to higher and better use."

One idea Klein and others have put out there is a possible expansion of the Northern Kentucky Convention Center, which is next door to the IRS center. The convention center for a decade has tried to get the state legislature to pay for an expansion, without success.

The site could also be good for a mix of residential and commercial, said Trey Grayson, president of the Northern Kentucky Chamber of Commerce.

"Hopefully over the next couple years we can make the best of the situation and redevelop the space," Grayson said. "It's valuable real estate."

Whatever is built there will likely be an improvement over the aging IRS building. It was built in the 1960s. President John F. Kennedy personally called then-Covington Mayor John Maloney to tell him the news that the federal government would build the IRS facility.

The building had started to show its age of late.

Outdated water lines flooded with sewage during the recent heavy rains, causing mold and other problems, Riley said.

"They've talked about closing that building since the day I started," Riley said. "It's finally come to fruition. I didn't think it would be happening under my watch."